T5 trying to ride growing data center wave

A little more than four years after forming, T5 Data Centers LLC continues expanding — a growth trajectory relatively few of its commercial real estate brethren have enjoyed.

Launched toward the beginning of the steepest downturn the industry has faced in decades, Atlanta-based T5 has almost 750,000 square feet of data centers, including build-to-suit projects outside of Charlotte, N.C., Dallas and Los Angeles, and it plans to expand in Portland, Ore., where no sales tax and low power costs are luring tech giants, including Facebook.

T5 is also eyeing an entrance into Singapore, where larger, publicly traded competitors such as San Francisco-based Digital Realty Trust Inc. (NYSE: DLR) have already expanded.

T5, currently backed by Washington, D.C.-based investor Iron Point Real Estate Partners L.P., plans to eventually go public. It’s targeting that chance by late 2015.

That would top off a fast ride for the company since March 2008, when a veteran team from The Staubach Co. left the commercial real estate brokerage to launch a firm that would purchase and develop data centers for global companies.

Pete Marin and three partners from that national data center practice — Frank Lyles, Jason Chartrand and Jimmy Bailey — saw companies trying to meet their data needs, but coming up with more questions than answers.

At that time, most data centers were housed in older warehouses and along railroads — too close to high-traffic areas. Many companies prefer their data centers — which house computer servers and equipment that form backbones of IT networks — to be more isolated.

The reason: security.

“There was no supply for these companies in terms of data centers, but there was a big demand for them,” Lyles said.

It appears T5 bet correctly. Since it formed, data traffic has grown dramatically, with the explosion of mobile devices connected to the Internet.

Companies have cut staff, but they have been more reluctant to reduce IT spending.

In Atlanta, T5 recently landed disability insurance company Unum as the first tenant in its new Alpharetta data center on Webb Bridge Road. It was part of Unum’s data center strategy to add redundancy and modernize its facilities and systems.

The advent of cloud computing, where data in the form of emails and photos are stored on servers, is also driving data center demand.

Microcosms of that trend can be found in companies such as Facebook.

In 2011, the social networking sensation — whose disappointing IPO has been the talk of Wall Street — kept growing its data center operations as use of its products continued to explode.

As a result, it spent an additional $35 million in rent for data center space, the company says.

For example, office building owners have been forced to adjust to rising vacancies and falling rents in cities such as Atlanta — a product of sluggish job growth.

Companies like Digital Realty Trust, meanwhile, have seen rents at some of their data center space increase by an average of up to 22 percent.

Digital Realty also recently worked with Delta Air Lines Inc. (NYSE: DAL) on a sale-leaseback transaction of a data center near Hartsfield-Jackson Atlanta International Airport, according to Jones Lang LaSalle Inc. Other REITs within the sector include DuPont Fabros Technology Inc., which built a $130 million facility in Santa Clara in 2011. This month, the company told Atlanta Business Chronicle sister publication Silicon Valley/San Jose Business Journal it expects the facility will be fully leased by the first half of next year.

T5 is also bullish. It’s expanding into Los Angeles, a market T5 believes is underserved. It’s eyeing Singapore, the fourth-largest financial center in the world behind New York, London and Hong Kong. And T5 plans to spend the next few years expanding its work force — currently 18 — in preparation for going public.

Before that: “We have to get all of this new space leased up,” Marin said.